The Hanshin Diesel Works,Ltd.

Business Details

The business consists of two categories: manufacture and sale of marine diesel engines and related equipment (Main Engines), and sales of parts, repair work, maintenance management, and machining (Parts & Repair Work). Main customers are shipowners and shipyards serving coastal shipping, and the company holds the top domestic market share. Its mainstay is 2-cycle engines for near-sea vessels, and exports are expanding, driven by tankers and other vessels for Asian markets. CMR (Casting & Metal Machining) is being cultivated as a second business pillar. All tangible fixed assets are located domestically.

Recent Overview

Orders received rose 34.2% and the order backlog rose 71.2%, driving a substantial improvement in performance; both higher revenue and higher profit are also forecast for the next fiscal year

In FY2026 (ending March 2026), net sales were ¥14,028 million (up 5.2% year on year) and operating income was ¥824 million (up 34.7% year on year), representing a substantial increase in profit. Progress in passing on price increases for main engines and cost reductions across various expense categories contributed to this result. Orders received built up to ¥19,021 million (up 34.2% year on year) and the order backlog reached ¥12,001 million (up 71.2% year on year), with shipyards continuing to have construction bookings filled 5 to 6 years ahead. Export sales expanded to ¥4,503 million (up 12.7% year on year). For FY2027 (ending March 2027), the company forecasts net sales of ¥17,200 million, operating income of ¥900 million, and net income of ¥730 million. Rising fixed costs, including personnel expenses and depreciation, remain a challenge.

Key Products

Growth Drivers

• Sustained expansion of replacement construction demand for coastal shipping: Even amid rising vessel prices, improvements in operating costs and charter rates are progressing, and moves toward replacement construction are steadily advancing. With some shipyards having construction bookings filled 5 to 6 years ahead, orders for main engines have surged
• Expansion of exports: Overseas inquiries centered on tankers have continued, expanding export sales by 12.7% year on year to ¥4,503 million. Main engine exports rose 7.8% year on year, and Parts & Repair Work exports rose 30.3% year on year
• Progress in improving contract prices: The company has advanced the pass-through of rising material costs, improving the gross margin from 18.2% in FY2025 (ended March 2025) to 20.9% in FY2026 (ended March 2026)
• Improved visibility of future sales from a substantial buildup in the order backlog: An order backlog of ¥12,001 million (up 71.2% year on year) supports future sales
• Strong overseas performance in Parts & Repair Work: Overseas Parts & Repair Work sales surged 30.3% year on year, offsetting the gradual decline in the number of vessels operating domestically

Risks

• Cost increases from soaring material prices and delays in passing on costs: Amid continued increases in the prices of steel and other materials, upward pressure on various material costs persists, making improvement of product contract price levels a challenge
• Rising personnel and fixed costs: Increases in personnel expenses from improved compensation and in depreciation expenses from large-scale capital investment are squeezing profits. Addressing rising fixed costs remains an ongoing challenge in FY2027 (ending March 2027) as well
• Constraints on the number of vessels built due to labor shortages at shipyards: Labor shortages at shipyards make it difficult to expand construction capacity, and the structure in which increased orders do not directly translate into increased sales persists
• Geopolitical risk and crude oil price volatility: The forecast does not factor in the impact of soaring crude oil prices due to the intensifying situation in the Middle East or the difficulty in procuring components due to supply concerns for naphtha and other crude oil-derived materials, creating uncertainty should these risks materialize
• Sluggish growth in the CMR business: CMR sales are on a declining trend, down 6.5% year on year to ¥606 million, posing a risk of delay in developing it as a second business pillar
• Risk of order losses in electronically controlled engines: The company has previously recorded substantial provisions for losses on orders for 2-cycle electronically controlled engines, and the risk of recurrence remains